Disclosure: Bullpen receives compensation from VersaBank for research coverage. VersaBank is also an IR client of LodeRock Advisors, an affiliate of Bullpen.

VersaBank (VBNK) ran over 15% last week after announcing the commercial rollout of its Real-Time Structured Receivable Program, which comes less than two months after the initial pilot…

… and should result in continued SRP asset growth, as the company takes share at existing partners and wins new business on the merits of the program.

Today, a point-of-sale lender will fund its lending activity using a secured credit line - borrowing ~80% of the loan’s value and using its own capital for the rest.

After 30-90 days, the lender will package up those loans and sell them to investors - using the proceeds to pay down the credit line so it can keep originating.

VersaBank’s Real-Time SRP circumvents the need for this structure, as it enables the bank to purchase the receivables associated with loans as they’re originated by partners…

… reducing their funding costs and capital requirements, which improves returns. While VersaBank is a US growth story, uptake will likely be felt in Canada initially…

… given share gains with existing partners will likely materialize first. If we get evidence of that in the coming quarters, there could be more upside as we highlighted with Q2 results.

Read our VersaBank report

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